Mortgage Terms 101
Tuesday Mar 09th, 2021
Mortgage terms can be confusing, we hope this list of some of the most common terms is of assistance.
A mortgage is a loan for a property that you own & it is secured by a lien registered on the title of your home. It can be repaid in regular weekly, biweekly or monthly installments. It usually pays down both principal & the interest & the payment may also include a portion of the property taxes.
The term is the length of time you have committed to a mortgage rate, the lender & the conditions set by the lender. When your term expires you have to renew the mortgage the remaining principal that you still owe. Most Canadians will renew the term multiple times through the entire amortization period.
Mortgage Term is the length of time you commit to your mortgage rate, the details and conditions set out by the lender. The length of the term varies, it’s usually anywhere from 6 months to 10 years, with the most popular term in Canada being 5 years. At the end of the term, you either pay off the mortgage in full or renew it, possibly with the option of renegotiating the terms & conditions.
Mortgage Rate is the amount of interest that the lender receives/charges for loaning you the money for the mortgage. Most mortgage rates are amortized so that each monthly payment is the same over the length of the mortgage, while the ratio of interest to the principal changes over time.
A lender is an entity that loans you the money (mortgage) to buy your home. Lenders include banks, trust companies, credit unions… A mortgage broker can work with many different lenders to get you a mortgage that meets your specific needs.
The amortization period is the length of time it takes to pay off your mortgage. It spread out in a series of fixed payments. It’s usually between 5 and 20 years, with a new mortgage’s amortization period usually being 25 years. A portion of each payment goes towards the balance of the loan and a portion is the interest.
If you have any more questions about mortgages please feel free to contact JoAnne at JoAnne@joannegludish.com
This information should not be relied on as legal advice, financial advice, or a definitive statement of the law in any jurisdiction. For such advice, please consult your own legal counsel or financial representative.